Late-May flowers

05/31/22
  • Stocks snap losing streak with second-best week in more than two years
  • Oil jumps, energy and consumer discretionary stocks lead rebound
  • This week: Jobs, manufacturing, home prices

The market never fails to surprise.

Just six trading days after the S&P 500 (SPX) fell briefly into bear-market territory, today’s trading will determine if the US stock market can turn May into its second positive month of the year.

The SPX is coming off its first up week in nearly two months—and its second-biggest weekly gain since November 2020—as investors shrugged off mostly soft economic data, including a slight downward revision to Q1 GDP:

Chart 1: S&P 500 (SPX), 3/9/22–5/27/22. S&P 500 (SPX) price chart. S&P swings to higher high.

Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)


The headline: Stocks charge higher in final full week of May.

The fine print: When the SPX closed above its May 17 high on Friday (dashed line on chart), it was the first time in nearly two months—and only the second time this year—that the index pushed above a previous swing high.

The number: 6.3%, the year-over-year increase (through April) for the Personal Consumption Expenditures (PCE) Price Index—the Fed’s primary inflation gauge. That was in line with estimates, and down from 6.6% in March. Durable Goods Orders, New Home Sales, and Pending Home Sales were weaker than expected.

The scorecard: The Nasdaq 100 (NDX) tech index led the market higher for the first time since April 1:

US stock index performance table for week ending 5/27/22. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source (data): Power E*TRADE. (For illustrative purposes. Not a recommendation.)


Sector roundup: The strongest S&P 500 sectors last week were consumer discretionary (+9.1%), energy (+8%), and information technology (+8%). The weakest sectors were health care (+3.2%), communication services (+3.5%), and utilities (+4.9%).

Highlight reel: Caleres (CAL) +30% to $27.19, and GameStop (GME) +29% to $115.17, both on Wednesday. On the downside, Forge Global (FRGE) -38% to $17.49 on Monday, SpringWorks Therapeutics (SWTX) -40% to $18.36 on Friday.

Futures action: July WTI crude oil (CLN2) ended last week at a new contract high of $115.10/barrel, up more than $4.50 for the week and more than $13.50 for the month. June gold (GCM2) hit a two-week high of $1,869.10/ounce last Tuesday, then pulled back to close Friday at $1,851. Biggest up moves: July oats (ZON2) +14.9%, July heating oil (HON2) +7.8%. Biggest down moves: May ether (ETHK2) -8.7%, June VIX (VXM2) -7.4%.

Coming this week

A busy start to the month ends with Friday's jobs report:

Today: S&P Case-Shiller Home Price Index, FHFA House Price Index, Chicago PMI, Consumer Confidence
Wednesday: S&P Global Manufacturing PMI, ISM Manufacturing Index, Job Opening and Labor Turnover Survey (JOLTS), Construction Spending, Fed Beige Book
Thursday: Challenger Job Cut Report, ADP Employment Change, Productivity and Labor Costs, Factory Orders, Vehicle Sales
Friday: Employment Report, S&P Global Services PMI, ISM Non-Manufacturing Index

Earnings this week include:

Today: Digital Turbine (APPS), HP (HPQ), Salesforce.com (CRM)
Wednesday: Hewlett Packard Enterprise (HPE), Pure Storage (PSTG), Chewy (CHWY), Veeva Systems (VEEV)
Thursday: Lululemon (LULU), Ciena (CIEN), SpartanNash (SPTN), Broadcom (AVGO)
Friday: BRP (DOOO)

Check the Active Trader Commentary each morning for an updated list of earnings announcements, IPOs, economic reports, and other market events.

Memorial Day trading patterns

Although in six of the 10 years from 2010–2019 the SPX posted a net loss in the four days after Memorial Day, longer term it’s been a relatively bullish spot on the calendar. Since 1971, the SPX has rallied in the shortened week after Memorial Day 32 of 51 times, gaining 0.5%, on average (almost four times its overall four-day average return).1

Maybe traders were relatively unenthused about returning from a long weekend, though, because the Tuesday after the holiday has tended to be the softest day of the week, closing higher less than 45% of the time.

 

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1 All figures reflect S&P 500 (SPX) daily closing prices, 1971–2021. Supporting document available upon request.

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